Nokia profit falls 40% in second quarter

HELSINKI (AP) – Nokia Corp. said Thursday that second-quarter net profit fell 40 percent to 227 million euro ($290 million) as the world’s largest mobile phone maker lost market share and sales remained flat. Analysts, however, noted its sales of smart phones were better than expected.

The profit was down from a net profit of 380 million euro in the same period last year, the company said. Revenue grew a mere one percent in the period to 10 billion euro from 9.9 billion euro a year earlier.

Nokia’s overall market share fell to 33 percent in the quarter 2010, down from 35 percent a year earlier. But it said market share in the smart phone sector remained at 41 percent – unchanged from the previous year and the first quarter of 2010, despite strong competition from iPhone-maker Apple Inc., and Research in Motion Ltd., which makes BlackBerry handsets.

“Nokia managed to hold onto that market,” said Neil Mawston, analyst at London-Based Strategy Analytics. “They actually sold 24 million smart phones, more than our forecasts, and that’s what maybe is helping to support the shares a little bit.”

Nokia shares closed up 2.5 percent at 7.17 euro ($9.21) on the Helsinki Stock Exchange.

The company repeated its prediction that the global mobile market will grow 10 percent this year while its own growth would remain flat. Nokia said it sold 111 million handsets in the quarter, up eight percent on 2009.

It also sold a record 24 million smart phones, up 42 percent on a year earlier.

The company remains the leader in the global mobile market, with 432 million devices sold last year, more than its three closest rivals combined, but competition in the smart phone sector was seen as being too much for the former industry bellwether. Now, Mawston says, those rivals may be feeling some pressure as well.

“The challenges are no longer unique to Nokia – they’re impacting other players in the market ... Blackberry and Apple are also under a little bit of pressure,”

Mawston said. “Despite the iPhone attack, maybe Nokia isn’t doing quite as badly as everyone thought.”

But the company’s share price has fallen more than 20 percent since the beginning of the year, aided by two profit warnings, and CEO Olli-Pekka Kallasvuo has come under increasing pressure with speculation that he will be replaced.

On Thursday, he conceded the rumors were hurting the company.

“This kind of speculation is not good for Nokia, and in one way or other we should be able to solve the problem to end the speculation,” he told Finnish broadcaster YLE.

Nokia has been slow at detecting new trends, like folding clamshell models and touchscreen handsets, and markets have been expecting something fresh from the company that once had the innovative edge in the industry.